John’s Car Wash (JCW) offers customers three cleaning options. Under Option 1, only the exterior is cleaned. With Option 2, the exterior and interior are cleaned. Option 3 provides exterior waxing as well as exterior and interior cleaning. JCW completed 4,000 Option 1 cleanings, 5,200 Option 2 cleanings, and 3,200 Option 3 cleanings during 2017. The average cost of completing each cleaning option and the price charged for it are shown here:
Option 1 Option 2 Option 3
Price charged…………………………………… $10……………. $12………… $21
Costs of completing task………………………….. 4………………. 5………….. 15
Required
a. Is JCW a manufacturing or a service company? Explain.
b. Which costing system, job-order or process, is most appropriate for JCW? Why?
c. What is the balance in JCW’s Work in Process and Finished Goods Inventory accounts on the December 31 balance sheet?
d. Speculate as to the major costs that JCW incurs to complete a cleaning job.
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